I write about business and regulatory aspects of blockchain and crypto

The Qiwi Plc logo sits on the wall at the company's headquarters in Moscow, Russia, on Monday, June 15, 2015. Qiwi Plc is forecast to post a record first-quarter profit as more Russians chose to use the company’s electronic-payment services amid an economic crisis that disrupted the country’s banking system. Photographer: Andrey Rudakov/Bloomberg

Decentralized cryptocurrencies like bitcoin are boilerplate boogeymen that are routinely be blamed for any and all sorts of mischief, but centralized digital currencies like Russia’s Qiwi pose a far more significant threat to U.S. election integrity in the immediate term.

Those were the points that Scott Dueweke, director of identity and secure transactions at DarkTower, a cyber defense firm, and CEO of the Identity and Payments Association, made to the U.S. Senate Judiciary committee Tuesday afternoon in a hearing that explored the role of cryptocurrencies and shell companies as vehicles for foreign actors to influence U.S. elections via social media ad buys, political contributions and other means.

“Russia does not need cryptocurrencies to influence our elections,” Dueweke told the committee.

He emphasized that many of the ads placed by Russian trolls and other agents on Facebook in the 2016 U.S. presidential election, as part of a broader disinformation campaign that supposedly tilted the election toward Donald Trump, were paid for with a Russian centralized virtual currency known as Qiwi - a Cyprus-based electronic payment provider that services much of the Russian-speaking world.

Further, he noted that an American payment processor also played an instrumental role in facilitating those election-related transactions.

“Visa, the credit card giant, partnered with Qiwi on a virtual wallet in 2011. There are approximately 18.5 million Visa Qiwi wallet accounts and they are a relatively easy way for Russians to send money internationally,” Dueweke reckoned.

Dime a Dozen

But Qiwi is far from the only Russian-enabled currency platform that can be employed by shady actors for the purpose of undermining elections.

WebMoney, another Russian centralized digital currency, has also become a popular medium of exchange for dodgy purposes. First launched in 1998, it is a global settlement system and electronic wallet that supports a multiplicity of currencies like dollars, rubles and bitcoin.

It can be easily transmitted and used in Russian-speaking countries, as well as in far-off places like Mexico and Vietnam, and it has frequently been implicated with criminal activity – such as serving as a payment medium for the purchase of credit card numbers and personally identifiable information in dark web marketplaces after the 2013 Target data breach.

Dueweke suggested that WebMoney is increasingly being used to pay hackers, trolls and others to do dirty work on behalf of Russian interests:

“Using well-protected servers, not a public blockchain, this service is chief amongst channels for Russian funds to flow to their “patriotic hackers” or other cooperating actors.”

A spokeswoman for WebMoney disputed these claims, noting that the company operates in a manner that is transparent and compliant with anti-money laundering regulations.

"We have a department designated specifically for interaction with government authorities and law enforcement agencies. But nobody has contacted us regarding these cases," she explained.

Dueweke also referred to PerfectMoney as another currency system that can be used for illicit behavior due to its anonymity features.

“PerfectMoney is perhaps the most anonymous centralized virtual currency and is distinctly used primarily by criminals. It is clearly run by Russian language speakers and has a business address in Hong Kong that is an empty office,” he said, adding:

“Taken together, these Russian language speaker-managed centralized virtual currencies represent a vibrant and growing set of services that are not only serving the e-commerce needs of Russian-speaking legitimate customers but also the criminal underground."

But Don’t Forget Crypto

Still, decentralized cryptocurrencies, for their part, should be classified as an “emerging threat,” according to David Murray, of the Financial Integrity Network, who also testified on the panel, in the context of election integrity.

In particular, so-called “privacy coins” that seek to evade transactional visibility pose the most notable risks in this area.

“The greatest emerging threat of foreign funds reaching the coffers of political candidates, or to be used to fund other influence operations, are the increasing number and liquidity of ‘privacy coins,’” Dueweke added.

The topic of privacy coins, also known as “anonymity-enhanced” cryptocurrencies also came up in a House of Representatives hearing on the use of virtual currencies in illicit finance last week.

Dueweke called for increased public-private cooperation around the issue of promoting and expanding digital identity solutions as a means of thwarting the future use of cryptocurrencies in the U.S. election process, concluding:

“Without stronger identity attribution and understanding of the digital payments ecosystem, this type of “disinformatsia” will continue”

I am a journalist and strategic communications professional in the blockchain and cryptocurrency space. I previously served as Washington correspondent at CoinDesk, where I covered the business applications and legal and regulatory aspects of blockchain technology and crypto...